The following example illustrates the principle of this paragraph (f)(5).
§ 1.482-4(f)(6)(iii) Example.
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By Internal Revenue Service
Category: US IRC Section 482 on Transfer Pricing, § 1.482-4 Methods to determine taxable income in connection with a transfer of intangible property | Tag: Arm's length consideration for intangibles, Hard-To-Value Intangibles (HTVI), Intangible property, Intangibles, Lump-sum payment, Transfer of intangible property, Transfer of intangibles, Transfers of intangibles
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- TPG2022 Chapter VI paragraph 6.195It would be important to permit resolution of cases of double taxation arising from application of the approach for HTVI through access to the mutual agreement procedure under the applicable Treaty....
- TPG2022 Chapter VI paragraph 6.194The first exemption means that, although the ex post evidence about financial outcomes provides relevant information for tax administrations to consider the appropriateness of the ex ante pricing arrangements, in circumstances where the taxpayer can satisfactorily demonstrate what was foreseeable at the time of the transaction and reflected in the...
- TPG2022 Chapter VI paragraph 6.193This approach will not apply to transactions involving the transfer or use of HTVI falling within the scope of paragraph 6.189, when at least one of the following exemptions applies: i) The taxpayer provides: Details of the ex ante projections used at the time of the transfer to determine the...
- TPG2022 Chapter VI paragraph 6.192In these circumstances, the tax administration can consider ex post outcomes as presumptive evidence about the appropriateness of the ex ante pricing arrangements. However, the consideration of ex post evidence should be based on a determination that such evidence is necessary to be taken into account to assess the reliability...
- TPG2022 Chapter VI paragraph 6.191For such intangibles, information asymmetry between taxpayer and tax administrations, including what information the taxpayer took into account in determining the pricing of the transaction, may be acute and may exacerbate the difficulty encountered by tax administrations in verifying the arm’s length basis on which pricing was determined for the...
- TPG2022 Chapter VI paragraph 6.190Transactions involving the transfer or the use of HTVI in paragraph 6.189 may exhibit one or more of the following features: The intangible is only partially developed at the time of the transfer. The intangible is not expected to be exploited commercially until several years following the transaction. The intangible...
- TPG2022 Chapter VI paragraph 6.189The term hard-to-value intangibles (HTVI) covers intangibles or rights in intangibles for which, at the time of their transfer between associated enterprises, (i) no reliable comparables exist, and (ii) at the time the transactions was entered into, the projections of future cash flows or income expected to be derived from...
- TPG2022 Chapter VI paragraph 6.188In response to the considerations discussed above, this section contains an approach consistent with the arm’s length principle that tax administrations can adopt to ensure that tax administrations can determine in which situations the pricing arrangements as set by the taxpayers are at arm’s length and are based on an...
- TPG2022 Chapter VI paragraph 6.187In these situations involving the transfer of an intangible or rights in an intangible ex post outcomes can provide a pointer to tax administrations about the arm’s length nature of the ex ante pricing arrangement agreed upon by the associated enterprises, and the existence of uncertainties at the time of...
- TPG2022 Chapter VI paragraph 6.186A tax administration may find it difficult to establish or verify what developments or events might be considered relevant for the pricing of a transaction involving the transfer of intangibles or rights in intangibles, and the extent to which the occurrence of such developments or events, or the direction they...
Supplemental Guidance
- Guidance for Tax Administrations on the Application of Guidance on Hard-to-Value IntangiblesA new report from the OECD contains guidance for tax administration on the application of the approach to hard-to-value intangibles (HTVI), under BEPS Action 8. This new guidance present the principles that should underlie the application of the HTVI approach by tax administration, with the aim of improving consistency and...